Bill Morris in Legal/Financial on March 10, 2022
Thousands of middle-class shareholders and unit-owners in New York City co-ops and condos will forfeit the coveted property tax abatement if their boards don’t agree by April 15 to pay prevailing wages to their building’s service employees, including door personnel, porters, handypersons and others.
But a new bill before the state Legislature would hit a loftier class: the super-rich.
Twin bills in the state Senate and Assembly would make the co-op and condo tax abatement unavailable to residents whose units have an assessed value of $200,000 or more. (Assessed value, which is used to compute property tax bills, is a fraction of a property’s market value.) The legislation’s stated purpose is “to more efficiently target tax policy towards pressing housing needs.”
In this case, those pressing needs are identified not as the city’s dearth of affordable housing — but rather its struggling public housing stock. To that end, the bill states: “This legislation requires that New York City must earmark an equivalent amount of revenue in a designated fund for the New York City Housing Authority, with payments authorized by the commissioner of the department of Housing Preservation and Development.”
The Senate bill is sponsored by Sen. Brian Kavanagh, a Democrat whose district stretches from Lower Manhattan to western Brooklyn. In the “Justification” section of the legislation, Kavanagh writes: “Every year, New York City gives away $612 million in a relatively unknown tax break to cooperative and condominium owners, including ultra-luxury owners. Given the $32 billion of needed repairs for safe and decent living conditions in NYCHA, the current law should be amended to eliminate the tax break for luxury owners and redirect revenue to the NYCHA. The abatement will not be changed for the majority of homeowners.”
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In other words, the bill flips the current Tax the Rich mantra of progressive politicians and reframes it as Don’t Give the Rich Any More Tax Breaks. The bill’s co-sponsor is Sen. Julia Salazar, the first-term Brooklyn Democrat who was a forceful proponent of the Housing Stability and Tenant Protection Act of 2019, which redrew the city’s real estate landscape. The sponsor of the companion bill in the Assembly is Harvey Epstein, a Democrat who represents the East Side of Manhattan.
The co-op and condo abatement was first introduced in 1997 as a way of bringing the tax burdens of co-op and condo residents in line with those of the owners of one- to three-family homes. It can cut an individual’s property tax bill by 17.5% to 28.1%, depending on assessed value. More than 320,000 co-op and condo owners received an average tax break of $1,890 in fiscal year 2019, according to Kavanagh’s figures, while the top 10% enjoyed individual tax breaks as high as $45,000, totaling $172 million. The cost of the abatement to the city has increased by an annual rate of 7%, until last year when it grew by 16%, driven by luxury condos developed with a 421-a tax abatement.
“This trend is expected to continue in upcoming years,” Kavanagh writes. “Reforming the [co-op and condo] abatement now will contain growing costs for New York City, while making investments necessary to preserve public housing.”
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